Issue 28: CLASS Act Halted Due to Solvency Concerns

This is the twenty-eighth issue in our health care reform series of alerts for employers on selected topics in health care reform. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

On October 14th, Secretary Kathleen Sebelius sent a letter and report to Congress indicating that the U.S. Department of Health & Human Services (HHS) could not find a way to implement the Community Living Assistance Services and Supports Act (CLASS Act) that would ensure its solvency for 75 years, as required by the Affordable Care Act.

The CLASS Act was created under the Affordable Care Act as a national long-term care insurance program to provide working individuals and others with better long-term care insurance options.  Under the CLASS Act, employers would deduct premiums from employee wages each payroll period and, after satisfying minimum participation requirements, an employee would be eligible to receive subsidies to help pay for long-term care in the event he or she is unable to perform everyday activities due to an illness, disease, the aging process or cognitive impairment.  The CLASS Act permitted employers to decide whether to participate, but any employer choosing to participate was required to automatically enroll all employees that did not affirmatively opt-out.  The CLASS Act was scheduled to begin in October 2012. 

The Affordable Care Act required HHS to design the CLASS Act in a manner that would be financially solvent for at least 75 years, but actuarial experts working with HHS were unable to identify any design option that met this requirement.  In her letter to Congress, Secretary Sebelius stated that the problems the CLASS Act intended to address were not going away, but she hoped that the work HHS had performed would help advance the cause of finding an affordable and sustainable long-term care option. 

Based on this letter and report, it does not appear the CLASS Act will be implemented, but we will continue to monitor future developments.